Radiant's Freight Market Update

This Week: Ocean Carriers to Introduce Carbon Emissions Surcharges in 2024, UAW Strike Continues to Impact Supplier Operations, Caution Advised for International Shipping Near Israel.

Ocean

Ocean carriers to introduce carbon emissions surcharges in 2024. Shippers are receiving initial carbon pricing as the European Union pushes for carbon neutrality by 2050. From January 1, 2024, the EU Emissions Trading System will cover the shipping sector, requiring carbon emission monitoring and reporting. Carriers must purchase emission “allowances” equivalent to their emissions, affecting vessels within the EU and traveling to/from non-EU ports. Some details, like transshipment ports, are still pending, expected to be published by the end of 2023 according to CMA CGM guidance. See a list of ocean carriers and their estimated 2024 carbon pricing from SupplyChainDive here.

EU to end antitrust exemption for liner shipping consortia. The European Commission has chosen not to extend the EU’s legal framework that grants liner shipping consortia immunity from EU antitrust regulations. On Tuesday, the Commission announced that the Consortia Block Exemption Regulation (CBER) will not be extended, as it no longer promotes competition in the shipping sector, and is set to expire on April 25, 2024. This decision comes after a review initiated in August 2022 to collect information on the CBER’s performance since 2020. The CBER permits shipping companies, subject to specific conditions, to engage in cooperative agreements for offering joint cargo transport services, commonly referred to as consortia.

Ports

Port of Savannah cargo volumes dropped in August. Cargo volumes at the Port of Savannah dropped by 28% YoY to 413,294 TEUs in August due to ongoing berth reconstruction, marking a decline in volumes since November last year. Berth 1 is finished with new cranes, and work at Ocean Terminal continues, including a big ship berth to be added in 2025 and 2026. In August last year, container volumes reached 575,513 TEUs, the port’s highest ever. While the port benefited during labor negotiations between the Pacific Maritime Association and the International Longshore and Warehouse Union, August volumes fell below pre-pandemic levels, down 6% compared to 2019.

Canada investing $150 Million in Quebec container terminal. Canada is investing up to $150 million under its National Trade Corridors Fund to build a new container terminal for the Montreal Port Authority in Contrecoeur, Quebec, to increase national supply chain capacity, according to Transport Topics. “By supporting the port in its expansion project in Contrecoeur, we continue our efforts to strengthen Canada’s supply chain. This is important so that we never again have to go through product shortages like we experienced during the pandemic, or the significant price increases that came along with them,” Pablo Rodriguez, Canada’s Minister of Transport and Quebec Lieutenant, said in a statement.

Trucking

Mexican president blaming Texas for border inspections delays. Mexican President Andres Manuel Lopez Obrador is blaming trade disruptions and a backlog of 19,000 trucks carrying $1.9 billion in goods waiting in Mexico to Texas Governor Greg Abbott’s border safety inspections, according to FreightWaves. He has lodged a diplomatic complaint with the U.S. government regarding these Texas-led truck inspections, which have caused significant disruptions to cross-border trade since Sept. 20. The congestion is due to a combination of high daily migrant crossings and increased commercial truck inspections by the Texas Department of Public Safety, impacting supply chains at some of the busiest U.S.-Mexico border crossings.

UAW strike continues to impact supplier operations. Ongoing United Auto Workers disruptions are continuing to present risks for automotive supply chains. The UAW extended its strike on September 29 to encompass workers at Ford’s Chicago Assembly Plant and General Motors’ Lansing Delta Township Assembly factory due to stalled negotiations. Local union chapters had previously gone on strike at three plants in mid-September after failing to reach agreements with major automakers. To assess the impact of the UAW’s strike strategy on auto suppliers, SupplyChainDive asked experts for their take on the expanded work stoppages and their implications for the automotive supply chain. You can read them here.

Rail

CN shares winter readiness plan despite regulatory uncertainty. Canadian railway CN is ready to manage extreme cold and substantial snowfall during the upcoming winter season. However, it cautions that potential new regulations may challenge its capacity to meet customer needs and maintain a smooth supply chain. This information is detailed in CN’s 2023-2024 winter plan, which has been recently submitted to the Canadian government. “As the season and our operational plan evolve, we will continue to collaborate with our customers and supply chain partners to further fine‑tune our plan,” President and CEO Tracy Robinson said in the plan’s introduction. “By working together as one holistic supply chain, and not as individual parts, we can create further capacity and adapt more effectively to the challenges of the winter season.”

Air

Multiple companies suspend freighter flights to Israel. FedEx Express has joined a number of other airlines in significantly reducing international flights to Israel following the recent Hamas attack. UPS also ceased its flights to Israel and has contingency plans for the safe delivery of existing shipments in the country. While authorities in the U.S., EU, and Israel have advised caution, they have not imposed flight restrictions. Israel’s aviation regulator recommended security reviews, increased fuel loads, and altered flight paths to the capital. Read more from FreightWaves here.

International

Caution advised for international shipping near Israel. The conflict between Israel and Hamas has forced the closure of a port located 10 kilometers north of the Gaza Strip border, and International shipping has been advised to be extremely cautious when navigating the region. Ashkelon, Israel’s largest oil terminal, is currently shut down due to ongoing military operations. Additionally, Israel’s energy ministry has instructed Chevron to halt operations at the Tamar natural gas field off the northern coast following Hamas’s unexpected attacks on Saturday. However, other ports, such as Haifa and Ashdod, remain open to maritime traffic, according to Splash 24/7.

Influx of ships increases capacity on East Asia-Russia routes. Capacity on East Asia-Russia routes increased by 44% in the past year as more operators acquired ships for trade with Russia, according to The Loadstar. Mainline operators withdrew due to Russia’s Ukraine invasion and international sanctions. According to Linerlytica’s recent report, East Asia-Russia capacity is now at 121,757 teu, up from 84,818 teu in October 2022. Total capacity on Russia-connected routes is even higher due to services connecting India, Turkey, and Russia. South Korea’s Ministry of Oceans and Fisheries data shows a revival in the South Korea-Russia route, with a 10% increase in cargo shipped from Busan Port to Far East Russia, reaching 7,000 teu by the second week of September. Cargo volume for the last two weeks of September is expected to exceed 8,000 teu.

Other

Extreme weather causes world sugar shortage. Consumers could see a rise in Halloween candy prices due to a global sugar shortage caused by extreme weather. Drought in Thailand, the fourth-largest producer of sugar, has caused production to be cut by almost a quarter. India, the US and Europe suffered flooding, representing the second, sixth and third top producers. Chief Meteorologist at Everstream Analytics, John Davis, said that extreme weather is expected to decrease the global sugar supply by 10% to 15% over the 2023/24 growing season. Sugar prices are currently at a 12-year-high of 31.54 cents per pound, according to the International Sugar Organization.